Construction Management - pdf - c02.pdf - po ang - Januszek66

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Chapter 2

Preparing the Bid Package

Online Plan Room

The Need

Plan rooms are typically conveniently located and can be visited by contractors in large

cities. These facilities provide access to bidding documents in order to facilitate the

bidding process. Sets of project plans, speciﬁcations, bidding information, and general

contractor lists for jobs being let for bid are available at plan rooms. However, utilizing

these plan room services can be time consuming and costly due to the need to travel to the

physical location of the plan room. Even though many plan rooms mail their members a

weekly newsletter for project update, a visit to the facility is required to check out the

project information in detail.

The Technology

Online plan rooms enable their members to conveniently view plan room projects

24 hours a day, seven days a week from the member’s home or ofﬁce location via the

Internet. Members can access, look, and download useful information for various

construction projects, and even print out actual plans using plotters or printers.

Contractors and estimators can get information and prepare for a bid in a timely and

efﬁcient manner. In addition, establishing an online plan room enables owners, architects,

and contractors to control and manage their bid process more effectively.

Additional features augmenting the online plan room services include Internet access to

the plan room via secure login, computerized estimating tools, worksheet build-up

function, real-time bidder notiﬁcation system (email/fax), project search with speciﬁc

criteria, and blueprint measurement on-screen, etc.

Utilization of these online plan rooms provides prospective bidders with 24 hour

accessibility. They also make the bidding process efﬁcient and well-organized, which

leads to reduced costs.

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Chapter 2

Preparing the Bid Package

Figure 2.1 Project development cycle (new).

2.1

PROJECT CONCEPT AND NEED

Since the constructed environment in which we live is realized in a project format, the

construction process can be best understood by examining the steps required to realize a

complete project. In Chapters 2 and 3, we will examine the step-by-step development of a

project. A schematic ﬂow diagram of the sequential actions required to realize a project is

shown in Figure 2.1. The framework for this discussion will be the development of a project

for competitive bid. As we will see in Chapter 4, this is the delivery system characteristic

of publicly contracted work. This approach requires that a full set of project documents be

developed before the project is offered for bid and construction.

Each project has a life cycle triggered by the recognition of a need that can best be

addressed with the construction of a facility. In a complex society, the number of entities

generating needs that will shape the built environment is very diverse. Private individuals

seek to construct housing that is functional and comfortable (e.g., home or residential

construction). Public entities such as city, state, and federal governments construct buildings

and required public structures to enhance the quality of life. Many public projects relate

to the development of the infrastructure. Bridges, tunnels, transportation facilities, dikes,

and dams are typical of public projects designed to meet the needs of a community and the

society in general.

Private entities such as commercial ﬁrms build facilities that provide goods and services

to the economy. These entities are typically driven by the objective of realizing a proﬁt.

Facilities constructed by private owners include manufacturing plants, hospitals, research

laboratories, hotels and commercial buildings, communications networks, and a host of

other project types.

2.2

ESTABLISHING NEED

The ﬁrst step in any project is the establishment of a need and a conceptual deﬁnition and

reﬁnement of the facility that will meet that need. If the need has a commercial basis, it

is normally deﬁned in terms of a market analysis that establishes the proﬁtability of the

proposed project. For instance, if the need relates to the construction of a chemical plant in

Spain, the ﬁrm constructing the plant will want to establish that a market exists that can be

proﬁtably accessed once the plant is in operation.

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2.3

Formal Need Evaluation

The economic basis for the plant must be established based on market studies projecting

the demand for the plant’s product mix across the planning horizon under consideration.

In many cases, these studies recommend optimal time frames for the plant construction to

meet the market in advance of competition. Plant size, site location, availability of labor

and supporting resources such as energy, water, and shipping connections are considered.

This study is sometimes referred to as a feasibility study.

This type of information must be developed so that planning decisions by senior man-

agement within the company can be made. Typically, feasibility information and supporting

cost analyses are submitted to the board of directors. The board then must decide whether

the investment required to build a plant is justiﬁed.

Similar analysis is necessary for any project. If a group of entrepreneurs decides to build

a hotel in Phoenix, Arizona, the basic economic considerations to determine the potential

proﬁtability of this venture must be examined. If the economic study supports the idea of

a hotel, a need is established. In this case, the ﬁnancial institutions that lend the money

for the development of the hotel typically require certain justiﬁcation before providing the

ﬁnancing. Therefore, the structure of the feasibility study is dictated, in large part, by the

requirements of the lending institution. The types of information required for developing a

commercial building project will be addressed in Chapter 10.

Public and community-service-related projects do not typically involve proﬁt and,

therefore, are triggered by other considerations. If the church board of the Smallville

Methodist Church decides to add a wing to provide a larger area for the Sunday school,

this decision is based on improving the quality of services provided by the church. Since

funds must be developed for such an addition, the church board will seek the assistance

of a consultant (e.g., architect or architect/engineer) to better deﬁne the scope of the new

addition. Design and cost information are required to approach a bank or lending agency

regarding ﬁnancing. Based on information from design and cost consultants, the church

board must decide whether to proceed to development of ﬁnal design documents or place

the project on hold.

Public entities such as city, state, and federal governments are continuously reviewing

societal needs. The annual cycle of activity for public agencies looks at the changing

demands of constituents with the objective of developing a plan (e.g., a set of projects) that

will improve services. State highway departments, for instance, have annual budgets based

on existing strategic plans. These master plans envision the construction of new roads and

bridges and the maintenance of existing infrastructure. Such plans are reviewed annually

and projects to repair and enhance the transportation network of each state are budgeted. In

this situation, the needs of the state are under continuous review. A balance between funds

available and transportation needs must be maintained.

2.3

FORMAL NEED EVALUATION

In deciding whether or not to proceed with preliminary and ﬁnal design of a given project,

three items should be developed during the conceptual portion of the project cycle. The

following elements provide input to the decision process:

1. Cost/beneﬁt analysis

2. Graphical representation of the project (e.g., sketch or artist’s rendering) and a layout

diagram of the facility

3. Cost estimate based on the conceptual-level information available

These documents assist the key decision maker(s) in deciding whether to proceed with a

proposed project.

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Chapter 2

Preparing the Bid Package

The cost/beneﬁt analysis in the case of commercial or proﬁt-based projects is simply a

comparison of the estimated cost of the project against the revenues that can be reasonably

expected to be generated. In public and other non-proﬁt-based projects (e.g., monuments,

churches, museums, etc.), development of the beneﬁt to be achieved is more difﬁcult to pin

down.

For instance, if a dam is to be constructed on the Colorado River, part of the beneﬁt

will be tangible (i.e., developed in dollars) and part will be intangible (i.e., related to the

quality of life). If power is to be generated by the dam, the sale of the electricity and the

revenues generated therefrom are tangible and deﬁnable in dollars amounts. Much of the

beneﬁt may, however, derive from control of the river and the changing of the environment.

This dam will prevent ﬂooding of downstream communities and form a lake that can be

used as a recreational resource.

The recreational aspects of the project and the protection of communities from ﬂooding

are difﬁcult to characterize in dollars and cents. They can be viewed as intangible beneﬁts

related to improvement of the quality of life. Protocols for converting intangible aspects of a

dam project into beneﬁts have been developed by the Bureau of Reclamation and the Army

Corps of Engineers (both government agencies involved in water resource development). At

best, however, evaluating intangibles is a judgment call and subject to review and criticism.

2.4

CONCEPTUAL DRAWINGS AND ESTIMATES

In seeking funding for entrepreneurial projects such as hotels, apartment buildings and

complexes, shopping malls, and ofﬁce structures, it is common practice to present conceptual

documentation to potential funding sources (e.g., banks and investors). In addition to a

cost/beneﬁt analysis, graphical information to include architect’s renderings or sketches

as well as layout drawings and 3D computer models assist the potential investor in better

understanding the project. For this reason, such concept drawings and models are typically

part of the conceptual design package. A cost estimate based on the conceptual drawings

and other design information (e.g., square footage of roof area, ﬂoor space, size of heating

and air conditioning units, etc.) is prepared.

Government projects at the federal level require similar supporting analysis and are

submitted with budget requests each year for congressional action. Supporting documenta-

tion includes layout sketches and outline speciﬁcations such as those shown in Figure 2.2.

The supporting budget for this project is shown in Figure 2.3. These projects are included

as line items in the budget of the government agency requesting funding. In this case, the

requestor would be the post engineer, Fort Campbell, Kentucky. This request would be

consolidated with requests at the Army and Department of Defense level and forwarded to

the Bureau of the Budget to be included in the budget submitted to Congress.

It is of interest to note that since the post ofﬁce project will not be built for at least a

year (assuming it is approved), a projection of cost to the future date on which construction

will begin is required. The projection is made using the Engineering News Record (ENR)

indexes of basic construction cost. Construction cost indexes such as the ENR index allow

estimators to project costs into the future. The building and construction cost indexes through

March 2005 are shown in Figure 2.4.

The summary on the last page of the estimate indicates that the baseline cost of the

project will be $909,050. The reserve for contingency is 10% of the base cost, or $90,900.

The amount budgeted for supervision of the work by the Corps of Engineers is $54,800.

The design cost is projected to be $70,000.

The amount of conceptual design documentation varies based on the complexity of the

project. Fairly simple building projects such as the Sunday school addition or the military

post ofﬁce can be conceptually deﬁned in terms of drawings, guide speciﬁcations, and a

cost estimate such as those shown in Figures 2.2 and 2.3. Large and complex projects such as

Figure 2.2 Project proposal: layout sketch and outline speciﬁcations.

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